Late payments are an all too common concern for small businesses and the self-employed, and dealing with conflict and money issues can be anxiety-inducing for many - so it's not surprising that we often create our own excuses for why we shouldn't chase that payment, before we even hear the clients excuses for not paying on time.
As part of our upcoming guide on dealing with late payments and the emotional impact it creates, we address a handful of the most common reasons to give ourselves from demanding our invoices get paid on time, and get some perspective from hard-nosed Bad Cop and slightly calmer Good Cop.
"It's probably just a one-off"
Bad Cop says: According to FreeAgent data, only 54% of invoices in the past 18 months were paid on time. That means almost half were paid late, 23 days late on average. It isn't a one-off, but an unfortunately all too common part of being self-employed.
Good Cop says: It's good to give your client the benefit of the doubt but don't let that good faith be abused - open a dialogue, ask if there are any issues with paying, and make sure they're clear on when they will pay. It'll soon become clear if it was a mistake or not.
"Chasing will damage my relationship with the client"
Bad Cop says: They've already damaged the relationship by not respecting you and your work enough by paying you on time!
Good Cop says: Whilst it's natural to worry whether chasing an invoice might mean you're seen as a 'difficult' freelancer and this might impact future work from this client - consider whether you want to be in a relationship with a client who is abusing your trust and making you put effort into getting paid. Shift your mindset from conflict to transaction, and in the same way you delivered the work on time, they are required to pay on time.
"They're a small business who are struggling too!"
Bad Cop says: They shouldn't have asked you do the work if they weren't able to pay you!
Good Cop says: It's really important to understand the situation your client is in, but if your client was going to struggle to pay your invoice, they really should have had this conversation with you before the invoice became overdue so you could come to an agreement, or not commissioned the work in the first place. You're a small business as well, and it isn't on you to ensure their cashflow is fluid enough to pay you.
"They haven't been paid yet, so I can't get paid yet"
Bad Cop: Who cares if they haven't been paid! Who knows when they might get paid? If they signed you up to do work without the funds to pay for it, that's not your problem! They're taking the risk - not you.
Good Cop: I agree with Bad Cop on this one - if your client has an agreement with a third-party which is reliant upon your work, they need to take the risk, not you, else where do you draw the line? Do you wait until their client has got paid by their customer? Whilst you can agree terms like this ahead of a project, it isn't acceptable to use this as a justfication after the work has been delivered.
"They're a big company, it's not going to make any difference"
Bad Cop: If they're a large company, they should have their process sorted out. They have people whose sole job is to clear invoices through the system! Name and shame!
Good Cop: Bad cop is right again. Although naming and shaming isn't my approach - larger companies have no excuse not to pay you on time, and we need to collectively call out bad practise, else it will continue. Speak to the Small Business Commissioner for advice, especially when you're dealing with larger businesses, many of whom should have signed up to the Prompt Payment Code.
"They're questioning the invoice."
Bad Cop: Pfft! It's too late. They had 30 days to complain.
Good Cop: Making sure you get sign-off on your work before you invoice is critical - acceptance criteria, clear scopes of work, and approval make sure there's no excuse or hold-ups.
"I could add a discount for early payment to encourage them"
Bad Cop: Why should you discount for them paying you on time? No!
Good Cop: Ugh, Bad Cop is right again. Don't take a financial loss on your good clients when the penalty should be on bad clients who pay late. You're owed the money, and you have rights to charge interest and a surcharge fee if you're paid late. Make use of your rights in law.
"I should probably just chalk it up to experience"
Bad Cop + Good Cop: No!
Whilst it is an all too common part of the self-employed experience, but just because it happens frequently doesn't make it acceptable.
If you accept late payments, the problem doesn't go away. Whilst we understand it can suck to be chasing, by standing up for your rights, you're making it easier for every person who follows you.
Don't take responsibility for their poor business practises, if you've done everything expected of you - you are entitled to be paid on time without excuse.
Tackling late payments is something we need to do together, whether it be through supporting IPSE's Pay Up campaign, through working with the Small Business Commissioner to call out bad payers, or simply supporting each other when dealing with the impact of overdue payments.
Unfortunately, late payments don't just cause cashflow issues but also impact our mental health - from the stress of dealing with conflict, the lost time and productivity from chasing payments, even loss of confidence in running your own business or significant stress and anxiety from money worries or debt.
Take a look at our complete guide to Dealing with Late Payments